Budgeting

How to Calculate ROAS for Beginners

ROAS means return on ad spend. The basic formula is simple: revenue from ads divided by ad spend.

If a campaign spends $1,000 and produces $4,000 in tracked revenue, the ROAS is 4.0, often written as 400%.

ROAS is not profit

ROAS does not include cost of goods, labor, software, agency fees, refunds, or overhead. A high ROAS can still be unprofitable if margins are low.

Lead generation is harder

For service businesses, revenue may happen days or weeks after the lead. In that case, track the path from click to lead, lead to appointment, appointment to sale, and sale to revenue.

Use ROAS with context

ROAS is most useful when conversion values are accurate and revenue is tied back to the original campaign. Otherwise, it can create false confidence.